US-China Trade war

Current Affairs CSS-2019 Question: What are the motives of Donald Trump to impose high tariﬀs on China in the Trade-War between Sino-US rifts?

Since 1949, US-China relations have evolved from
tense standoffs to complex aggressive
diplomacy, growing rivalry, and increasingly intertwined economies. Both
countries have an extensive economic
partnership and a great amount of trade between the two countries.

The emergence of the US-China Trade War

Both had good relations until China accused the US of launching US-China trade war and imposing high tariffs on 6th July 2018. The US has forced three rounds of tariffs on Chinese goods, which include industrial and consumer items, mounting more than $250 billion. After a short time, Donald Trump has threatened tariffs on another $267 billion worth of goods, which means all Chinese trades could be subject to tariffs. On the US-China trade war tariffs, Chinese Government spokesman said, ‘China will not bow in face of threats and blackmails’.

Effects of Aggressive Rivalry

As China is the largest
lender to the US and Japan being the
second largest. US debt to China was $1.15 trillion i.e., 18 % of total public
debt owned by foreign countries. It would be disastrous if China cuts back on
its Treasury purchases, which would throw the US
into a recession. Donald Trump threats to classify China as a “currency
manipulator” as a part of the US-China
trade war. But what could be the actual motives of Trump to impose high tariffs
on China?

Consumer Goods

China produces consumer
goods at lower costs than other countries. China’s competitive pricing is a
result of a low standard of living, which
allows China to pay lower wages to labors. And as a result of the exchange rate which is partially fixed to the dollar. So tariffs, make US-made products
cheaper than imported ones and encourage
consumers to buy American. But if Trump implemented trade protectionism, U.S.
consumers would have to pay high prices for their “Made in America”
goods. It’s improbable that the trade deficit will change. Most people would
rather pay as little as possible for electronics, and clothing, even if it
means other Americans lose their jobs.

Trump has demanded that
China better protect American intellectual property, including ending cyber theft. Trump ordered China to allow US
companies’ greater access to Chinese markets and to cut its US trade surplus.

The motive behind Trump imposing tariffs

Trump promised to provide jobs to US people and renegotiate US trade
deficits. Before agreements with China, the US
had the world’s largest deficit worth $568 billion last year. China is
responsible for the bulk of deficit in
terms of goods, exporting $376 billion more to the US than it bought from US
producers. Trump also imposed tariffs on worldwide imports of goods like steel
and washing machines, which further affects products from China.

Impact of US-China Trade War so far

If the US-China trade war continues to grow forward,
fears about a further escalation have
rattled investors and hit global stock markets. IMF has warned a full-blown
trade war would weaken US trade and will have an enormous impact on global supply chain linkages, as a result,
weakening global trade.

Conclusion

The US-China Trade War which grabbed the spotlight on 2018, have sketched the outlines of a deal to end US-China Trade War and sought to negotiate their way out of such situation. But after rounds of talks, including a Chinese pledge to significantly increase purchases of American products, Trump decided to go ahead with the tariffs.